Underbanked Consumer Financial Services Market Estimated at $78 Billion
Today, the Center for Financial Services Innovation (CFSI) and Core Innovation Capital released their second annual underbanked market sizing brief, which illustrates the range of opportunities for institutions seeking to develop high-quality, affordable financial solutions in the marketplace. The report, which benefits from strategic input and financial support from Morgan Stanley, encompasses 22 financial product types utilized by over 68 million underbanked consumers in the United States.
The new data reveals revenue gained from interest and fees paid by underbanked consumers rose to $78 billion in 2011, a seven percent increase from comparable 2010 data. This revenue was generated from an overall market volume of $682 billion in principal loaned, funds transacted, deposits held, and other financial services rendered.
“This research demonstrates the large and growing revenue opportunity represented by underbanked consumers as they seek to access credit, make payments, save, and plan for the future,” said Rob Levy, Manager, Insights and Analytics, CFSI. “While the quality of products represented here varies widely, our goal is to help providers understand the unique financial needs of these consumers as they work to launch safe, affordable, high-quality financial products and services into the marketplace.”
The industry continues to show growth in short-term credit and payments categories, as these sectors capitalize on technological advances, respond to regulatory changes and address the needs of consumers in a post-recessionary economy. At the financial product level, the strongest growth came from subprime credit cards, internet payday loans, and open-loop prepaid cards, with each product demonstrating gains greater than 21 percent versus 2010.
“This study shows just how big of an opportunity the underbanked market represents,” said Arjan Schütte, founder and Managing Partner of Core Innovation Capital. “We believe financial technology innovators can build great companies by helping one in four Americans borrow, spend, save, and plan better, and strengthen the middle class.”
“By framing the depth and breadth of the underbanked marketplace, this research will play a key role in attracting entrepreneurs and investors to support the development of innovative products and services that responsibly address the needs of underbanked communities,” said Audrey Choi, Managing Director and Head of Global Sustainable Finance at Morgan Stanley.
CFSI and Core Innovation Capital project market growth to continue - the report forecasts underbanked consumers will generate revenues of more than $85 billion in 2012.
The brief offers industry leaders an overall perspective of the underbanked landscape, and highlights opportunities to leverage new developments in the financial products market. For more information or to download the research report detailing the methodology behind the data, go to http://cfsinnovation.com/content/2011-underbanked-market-sizing-study.
The Center for Financial Services Innovation is the nation's leading authority on financial services for underbanked consumers. Through insights gained by producing original research; promoting cross sector collaboration; advising organizations and companies by offering specialized consulting services; shaping public policy; and investing in nonprofit organizations and start-ups, CFSI delivers a deeply interconnected suite of services benefiting underserved consumers. Since 2004, CFSI has worked with leaders and innovators in the business, government and nonprofit sectors to transform the financial services landscape. For more on CFSI, visit www.cfsinnovation.com.
About Core Innovation Capital:
Core Innovation Capital is the only venture capital fund that invests exclusively in financial technology companies serving America's underbanked consumer market. Its target segment consists of more than 68 million consumers, who generate over $1 trillion in annual income and spend more than $78 billion in fees and interest on financial services per year. The fund partners with proven entrepreneurs who seek above market-rate returns and share its vision to improve the lives of low- to moderate income Americans. Based in New York City, the partnership is backed by leading institutional investors. For more information about Core Innovation Capital, visit http://www.corevc.com.
About Morgan Stanley:
Morgan Stanley is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services. The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 1,200 offices in 43 countries. For further information about Morgan Stanley, please visit www.morganstanley.com.
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